Gulf Coast Storm Reserves Need Beefing Up

Texas State Rep. John Smithee, R-Amarillo, said last week he is concerned the quasi-governmental Texas Windstorm Insurance Association might not have the money needed to pay damages if a large hurricane hits the Gulf of Mexico coast this year.

Smithee, chairman of the House Insurance Committee, sent a letter to insurance commissioner Eleanor Kitzman outlining his concerns. He said developments over the past 18 months “have resulted in a current financial condition of TWIA that is much worse than any of us had anticipated.”

The 2009 Legislature authorized the TWIA to issue up to $2.5 billion of tax-exempt bonds for claims if its reserves are not sufficient. Smithee said even so, the damages from a major storm would far exceed the resources available.

TWIA is insurer of last resort for residents and business in 14 coastal counties that otherwise could not obtain storm insurance.

Smithee said it might be difficult to sell the bonds after a major disaster hits the Gulf Coast. The rates are too low, he said, and operational costs are escalating due to ongoing litigation relating to disputed claims from Hurricane Ike in 2008.

“It would seem only fair that policyholders should be made aware of the precise risk they are taking in purchasing insurance from TWIA,” Smithee wrote.

Kitzman agreed that the insurer’s finances may not be sufficient to meet claims. “There are circumstances under which the Texas Windstorm Insurance Association’s current funding options may be insufficient to pay all policyholder claims on a full and timely basis,” she said. “This is not a new development but one that Texas Department of Insurance has been monitoring for some time.”

The Texas Department of Insurance took administrative oversight of the TWIA in 2011.

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